SM Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd

[2005] SGHC 58
Case Number : Suit 594/2003
Decision Date : 30 March 2005
Tribunal/Court : High Court
Coram : Judith Prakash J
Counsel Name(s) : Kannan Ramesh, Ang Wee Tiong and Dawn Chew (Tan Kok Quan Partnership) for
the plaintiff; Boo Moh Cheh and Mohamed Ibrahim (Kurup and Boo) for the
defendant
Parties : SM Integrated Transware Pte Ltd — Schenker Singapore (Pte) Ltd
Contract – Formalities – Agreement for leases – Plaintiff alleging loss and damage suffered due to
defendant's repudiation of lease of plaintiff's warehouse – Defendant arguing negotiations for lease
of warehouse never completed – Whether essential terms of contract agreed to unconditionally by
parties – Whether concluded contract between parties for lease of warehouse existing
Contract – Formalities – Agreement for leases – Whether requirement under s 6(d) Civil Law Act
that agreement be in writing and signed by party to be charged therewith fulfilled – Whether e-mail
correspondence between parties constituting sufficient memorandum or note of agreement
– Whether e-mails fulfilling "in writing" requirement – Whether signature requirement satisfied
– Section 6(d) Civil Law Act (Cap 43, 1994 Rev Ed), s 2 Interpretation Act (Cap 1, 2002 Rev Ed)

Landlord and Tenant – Agreements for leases – Plaintiff alleging loss and damage suffered due to
defendant's repudiation of lease of plaintiff's warehouse – Whether lease agreement subject to
implied condition precedent – Whether failure of alleged condition precedent to materialise operating
to release defendant from performance of obligations under lease agreement

30 March 2005 Judgment reserved.

Judith Prakash J:

1 The plaintiff, SM Integrated Transware Pte Ltd (“SMI”), has brought this action against the
defendant, Schenker Singapore (Pte) Ltd (“Schenker”), to recover damages it claims it has incurred
by reason of Schenker’s failure to take up a lease of a warehouse at 7 Kwong Min Road, Singapore
(“the warehouse”). Schenker denies that there was any concluded lease for the warehouse so as to
render it liable in damages to SMI.

The facts

Events in 2002

2 Both parties to this action are companies incorporated in Singapore who are in the business
of providing third party logistics services. The warehouse was built by SMI on land that it had leased
from the Jurong Town Corporation (“JTC”) and has the capacity to store dangerous goods.

3 In October 2002, the warehouse was occupied by a company called Richland Logistics Pte
Ltd (“Richland”) but its lease was due to expire shortly. SMI was therefore interested in finding a new
occupant for the warehouse. At the same time, Schenker was trying to obtain a contract from a
company called Merck Pte Ltd (“Merck”) to handle its dangerous goods in Singapore. Schenker’s own
warehouse did not have enough capacity to receive the Merck goods if the contract was awarded
and Schenker was therefore looking to lease some additional warehouse space in Singapore.
4 On 30 October, Mr Daniel Heng Yew Khiang who was then the general manager of SMI, met
with Mr Roman Claus Luth, an employee of a company associated with Schenker. At that meeting and
in subsequent discussions and correspondence, Mr Luth represented Schenker although he was not
directly employed by it. The two men discussed the proposed lease of the warehouse to Schenker as
well as the provision by SMI of certain trucking services to Schenker. Mr Heng said that Mr Luth told
him that Schenker had already seen the warehouse and was keen to lease it. Mr Heng thought that
the warehouse would be used to service various customers of Schenker. According to Mr Heng,
Mr Luth did not inform him of who Schenker’s customers were or the type of products that would be
stored in the warehouse. Mr Luth, on the other hand, said that he told Mr Heng that Schenker was
looking for additional warehouse space because Merck was going to appoint Schenker to handle its
dangerous goods.

5 The meeting was followed by an exchange of e-mail correspondence. I should note here that
throughout the negotiations and their subsequent dealings, the parties contacted each other by
telephone and by e-mail. They also had personal meetings. No traditional correspondence in the form
of letters was exchanged between them.

6 In Mr Heng’s e-mail to Mr Luth of 30 October, he stated that SMI would consider a lease of
three years plus an option to renew for a further three years and would look into the cost of installing
another cargo lift in the warehouse. He also gave details of other services that SMI could provide. On
1 November, several e-mails were exchanged between Mr Luth and Mr Heng regarding the
arrangements for Schenker to view the warehouse and SMI’s quotation for trucking of dangerous
cargo. Mr Luth asked that the quotation and letter of intent in relation to the lease of the warehouse
be provided as soon as possible.

7 Later that same day, Mr Luth, Mr Tan Tian Tye, the general manager of Schenker’s logistics
division, and some other Schenker staff viewed the warehouse. Mr Heng and Ms Yong Choon Fah, a
real estate agent employed by SMI to market the warehouse, discussed the monthly rental and the
duration of the lease with them.

8 On 5 November, Mr Heng sent Mr Luth an e-mail with an attached letter of intent marked
“Subject to Contract” in relation to the lease of the warehouse. Mr Heng stated in the e-mail that
SMI was seeking a monthly rent of $48,000. The letter of intent itself did not go into much detail. It
stated only that SMI wished to enter into a service agreement with Schenker for the provision of the
warehouse for warehousing and related logistics services and that the commencement date would be
1 January 2003 with other terms and conditions to be discussed. The letter of intent required
Schenker to confirm its acceptance by signing and returning the same to SMI within 14 days.

9 Schenker did not sign the letter of intent. On 18 November, Mr Heng telephoned Mr Luth and
asked what the position was. According to Mr Luth, he replied that Merck had not as yet come to a
decision to appoint Schenker to handle its goods but he expected the decision to be made the same
day. Until the decision was made, Schenker would not be able to commit itself to renting the
warehouse. Mr Heng agreed to give Schenker an extension of time until close of business that day.
Mr Heng’s version of this conversation was that Mr Luth had said that Schenker was waiting for its
“customers” to revert and that Merck’s name was not specifically mentioned.

10 On 25 November, Schenker asked for a further extension of time. In his e-mail to Mr Heng,
Mr Tan said that Schenker was eager to make the transaction happen but as its “customer” was then
making the final evaluation of Schenker’s offer, Schenker could only give a tentative decision on
27 November and a confirmed decision on 29 November in line with its customer’s timetable. SMI
agreed to extend time till noon on 27 November. That day Mr Tan and Mr Luth went to SMI’s office
where they met Mr Heng and Ms Jean Chai, the finance and administration manager of SMI. After the
meeting, Mr Heng sent Schenker an e-mail summarising what he thought both parties had agreed to.
This was, firstly, that there would be an extension of time up to 29 November for Schenker to confirm
that it would lease the warehouse. Secondly, the monthly rental would be $43,000. Thirdly, regarding
Schenker’s request that the lease commence on 1 January 2003, SMI would, upon Schenker’s
confirmation that it was taking the warehouse, do its best to persuade Richland to vacate by that
date.

11 On 28 November, Mr Tan informed SMI that Schenker had had a good meeting with Merck and
Schenker was expecting to get good news from Merck shortly. On the same day, Mr Luth sent a draft
logistics service proposal to Mr C K Ho of Merck. On 9 December, Mr Ho sent Schenker an amended
copy of its logistics service agreement that set out the various logistics services that Schenker was
to provide to Merck and proposed a commencement date of 15 January 2003 for the Merck contract.
Ten days later, Mr Tan telephoned Mr Ho and asked him whether Merck was awarding Schenker the
contract since Schenker had to confirm the lease of the warehouse. Mr Ho told him that he did not
foresee any problem and that Schenker should go ahead with that lease.

12 Later that same afternoon (19 December), Mr Tan called Mr Heng. After repeating what
Mr Ho had said, Mr Tan informed Mr Heng that Schenker would therefore like to lease the warehouse
from SMI. According to Mr Tan, he also cautioned Mr Heng that, as at that time, he had not received
written confirmation from Merck and that Schenker needed the draft lease contract to be vetted and
approved by its solicitors. Mr Heng asked for an e-mail to confirm Schenker’s intention to take the
lease. On 20 December, Mr Tan sent Mr Heng an e-mail stating “This serve [ sic] to confirm that
Schenker will proceed with the leasing of the warehouse as per our discussion. Please arrange to hand
over the warehouse to us by 15 Jan 03”. Mr Heng then instructed Ms Yong to prepare a draft of the
formal agreement.

13 Ms Yong drew up a document entitled “Handling Service Agreement” (“handling agreement”).

The handling agreement provided for SMI to provide Schenker, for a period of two years from
1 February 2003 to 31 January 2005, with warehousing and logistics services and also two trucks and
such other services as might be required from time to time during the term of the agreement.
Schenker was to pay SMI $43,000 per month as rental/handling charges for the exclusive use of the
warehouse and, secondly, for any other services provided by SMI, with charges at such rates as the
parties might mutually agree from time to time. The draft handling agreement was given to Mr Tan for
Schenker’s consideration. On 30 December, Mr Tan, having vetted the draft, sent an e-mail to
Mr Heng stating that he wanted the handling agreement amended to include various matters including
the provision of a one-month rent-free period for the setting up of operations. Mr Heng replied the
same day to say that SMI agreed to a two-week rent-free period. The next day, Mr Tan stated that
whilst Schenker would try and set up its operations within two weeks of the date of handing over of
the warehouse, if it was unable to do so, it would need to get back to SMI to extend the rent-free
period to a month.

Events in 2003

14 On 7 January 2003, Mr Tan forwarded the draft handling agreement to Schenker’s solicitors
for their comments and advice. According to Mr Tan, it was Schenker’s usual procedure to send all
final drafts of fresh contracts to its solicitors for vetting before agreeing to such contracts. It was
also Schenker’s practice to heed the comments and follow the solicitors’ recommendations very
closely.

15 In the meantime, Richland had indicated to SMI that it wished to extend the duration of its
lease. SMI told Richland that this was not possible as the warehouse had been committed to
Schenker. Richland was not pleased about having to move out. A meeting was then called for all
parties to discuss the date of the handover of the warehouse.

16 The meeting took place on 8 January at SMI’s office. Mr Tan attended on behalf of Schenker
and one Mr Lim Chwee Kim represented Richland. They discussed the date on which Richland would
vacate and hand over the warehouse and the possible dates on which Schenker could be allowed to
enter the warehouse to do fitting-out works. Mr Heng found the atmosphere of the meeting to be
tense. On the one hand, Schenker was very anxious to carry out its fitting-out works so that it could
commence operation soon. It wanted an early handover date. On the other hand, Richland was not
happy to vacate the warehouse. Richland wanted to move out by the end of February 2003 but
Schenker insisted on an earlier date and the parties eventually agreed on 6 February as the date of
the handover.

17 Ms Yong was also present at the meeting. She prepared minutes of the same. These were
sent by e-mail to Mr Heng, Mr Tan and Mr Lim. To summarise, the contents of the minutes were as
follows. Firstly, it was stated that Richland would vacate on 6 February and that there would be a
joint inspection of the warehouse by all three parties at 12.00 noon on that date. Secondly, by
23 January, Richland would clear the warehouse space on the ground floor so as to allow Schenker to
do some partitioning and air-conditioning work. Thirdly, Richland would allow Schenker’s contractors,
subject to prior arrangement, to visit the premises to do planning and testing work. Fourthly,
Schenker’s contractors would be allowed to commence work on location codes and distribution points
on 4 February. Finally, Richland would remove its existing cable network by 6 February.

18 Mr Tan responded on 10 January by sending an e-mail to Ms Yong with copies to Mr Heng and
Mr Lim. He said “I accept all the points stated in Choon Wah [sic] mail. Please note that no further
delay in the handing over would be allowed in view of the tight situation we are facing”. Mr Lim also
confirmed his acceptance of the matters set out in Ms Yong’s e-mail except that he wanted to
change the date for clearance of the warehouse space from 23 to 27 January.

19 On 13 January, Schenker had a meeting with Merck. According to the minutes of that
meeting, Schenker informed Merck that in order to handle Merck’s business, it had leased a warehouse
for dangerous goods located at Kwong Min Road and that it would take over this warehouse by
3 February.

20 On 22 January, Schenker’s contractors installed some bar codes on the racks in the
warehouse and also carried out some network cabling testing work. In the meantime, Schenker’s
solicitors had sent their client two letters with their comments on the draft handling agreement. They
raised various issues including the following:

(a) As the handling agreement was, substantially, a lease, stamp duty would be payable on
it and therefore it had to contain a provision as to which party was to bear the stamp duty.

(b) Interest on late payments should be fixed as the average of the prime rates of the three
local banks instead of at 10% per annum as suggested by SMI.

(c) There should be a provision providing for the time period in which the deposit payable
under the agreement should be refunded and for interest to be paid by SMI for a late refund.

(d) Whether SMI had obtained the permission of JTC to the proposed lease as JTC was the
ultimate owner of the warehouse.
 (e) Since SMI had mortgaged the warehouse to the United Overseas Bank Ltd (“UOB”), the
latter’s approval would be required for the proposed lease.

Mr Tan told Mr Heng that Schenker wanted to follow the advice given by its solicitors and sent
Mr Heng copies of these letters.

21 On 27 January, a meeting was held to discuss the solicitors’ comments. Present at the
meeting were Mr Heng, Ms Chai and Mr Tan. According to Mr Tan, during the meeting, he requested
Mr Heng to seek JTC’s approval for the lease of the warehouse to Schenker. Mr Heng said that there
was no necessity to obtain JTC’s approval since the handling agreement was only a service
agreement and not a tenancy agreement. Mr Tan then told Mr Heng that he had his reservations and
would leave it to Schenker’s solicitors to look at the point again.

22 Mr Heng’s version of what happened at the meeting was that Mr Tan was very eager to
proceed with the commencement of the lease and did not appear to be too concerned with the
solicitors’ comments. Mr Heng said that Mr Tan and he agreed that the provision of other logistics
services, such as the trucking services, should be separated from the main lease agreement. Mr Tan
told Mr Heng that he would deal with the solicitors’ comments directly with the solicitors. As for the
issue of JTC’s approval, Ms Chai told Mr Tan that since, apart from warehousing facilities, other
logistics services were to be provided to Schenker, JTC’s approval might not be required. To Mr Heng,
Mr Tan did not appear too concerned about JTC’s approval.

23 After the meeting, Mr Heng instructed Ms Yong to revise the handling agreement in
accordance with what had been discussed. Later that same day, Ms Yong sent Mr Tan, Ms Chai and
Mr Heng the revised agreement. This document, re-titled “Logistics Service Agreement” (and which I
shall refer to as the “draft LSA”), provided for:

(a) SMI to supply Schenker with warehousing facilities at the warehouse and integrated
logistics services for a period of two years (with an option to renew for a further period of one
year);

(b) the commencement date to be 1 March 2003;

(c) the monthly rental to be $43,000, payable in advance, within seven days of the receipt
of SMI’s invoice; and

(d) interest at the rate of 10% per annum to be paid on outstanding amounts.

24 On 4 February, Mr Tan sent an e-mail to Ms Yong and extended copies of it to Mr Heng and
Ms Chai. In this e-mail, he said:

Dear CF

We agree to remove the Addendum from the contract to avoid complication with the [lawyer].
The agreement on the new installations will instead be recorded in the form of letter of exchange
between Schenker and SM.

For the rest of the contents appear to be OK with me, except Clause 2, the Word “in Advance”
should be removed as the sentence contradict to [sic] the following one which state Schenker
shall pay, within 7 days upon receipt of SM’s invoice.
 Please send me the amended copy and I will get it clear [sic] with my [lawyer].

In his evidence, Mr Tan explained that the references in his e-mail to the lawyer and his lawyer were
references to Schenker’s solicitors.

25 The next morning, Ms Yong sent the amended draft LSA to Mr Tan. She had removed the
addendum from this document and provided for the rental to be paid monthly in advance whereas fees
for services had to be paid monthly in arrears. She had also provided for a grace period of seven days
to be given for payment before interest would be chargeable. Mr Tan did not respond directly to this
e-mail or comment on the amended draft LSA.

26 On 6 February, a handover inspection was held at the warehouse. Present at the inspection
were Mr Lim of Richland, Mr Heng and Mr Tan and his colleague, Mr Feisal. The men inspected the
premises and identified the defects that SMI had to rectify. A list of these defects was subsequently
drawn up and was sent to Mr Tan by Ms Yong on Monday, 10 February. Ms Yong asked whether there
were any items that Schenker wanted to add to the list and told him that SMI had employed
contractors to do the rectification works and these works were scheduled to be completed that same
week. She also asked for Schenker’s reply on the draft LSA. Mr Tan thanked Ms Yong for the list and
asked her to include cleaning and repainting of the warehouse as items on the list. He did not make
any comments on the draft LSA.

27 Then, things took a dramatic turn. On the afternoon of 10 February, Merck sent Schenker an
e-mail stating that because it was tied up with certain re-engineering of its own processes, it had to
focus its resources on that project and hence its “future outsourcing requirements of the logistics
process” had to be put on hold. The next day, Mr Tan informed SMI that Merck had pulled out of the
project although Schenker had been given the understanding that Merck would work with it if
Schenker secured a warehouse for the storage of dangerous goods. His e-mail also stated that as
Schenker had intended to use the warehouse for its project with Merck, Schenker had decided that it
was not feasible for it to proceed with its own dangerous goods operations and therefore had decided
not to proceed with the lease of the warehouse. Schenker apologised for its decision and requested
SMI’s understanding on the matter.

28 On 18 February, Mr Tan had a meeting with Mr Heng and Ms Yong. According to Mr Heng,
Mr Tan was very apologetic about Schenker’s decision not to proceed with the lease. He said that he
had not expected Merck to pull out at the last minute. Mr Heng offered to reduce the monthly rental
until such time as Schenker could establish its dangerous goods operation but Mr Tan said that
although Schenker could make use of the warehouse to service its other customers, the major
customer was to have been Merck. Accordingly, Schenker did not find it cost-effective to proceed
with the lease. The meeting ended amicably with Mr Tan assuring Mr Heng that he would speak to his
management on how Schenker might compensate SMI for not proceeding with the lease.

29 There were further meetings between the parties but no agreement could be reached on
compensation. At the end of April 2003, Schenker’s solicitors wrote to SMI stating that no contract
had been concluded and there was no basis for SMI to claim damages from Schenker. This action was
commenced by SMI in June 2003.

The pleadings

30 By para 3 of its Amended Statement of Claim, SMI averred that by an agreement contained in
and/or evidenced by and/or inferred from, inter alia, various e-mail correspondence between SMI, its
agent and Schenker from October 2002 to February 2003 and the draft LSA, SMI had agreed to
provide Schenker with warehousing services at the warehouse for a period of two years from 1 March
2003 with an option to renew for a further year and Schenker had agreed to pay a monthly rental of
$43,000 for the warehouse.

31 SMI pleaded[1] that the agreement was made partly orally, partly in writing and partly by
conduct. In so far as it was made orally, the agreement was made at meetings between Mr Heng
acting on behalf of SMI and Mr Tan and/or Mr Luth acting on behalf of Schenker. In para 7 of the
Amended Statement of Claim, SMI stated that in so far as it was made in writing, the lease was
contained in or evidenced by the following documents:

(a) an e-mail dated 5 November 2002 from SMI to Schenker;

(b) an e-mail dated 20 December 2002 from Schenker to SMI;

(c) an e-mail dated 23 December 2002 from SMI’s agent to Schenker;

(d) an e-mail dated 30 December 2002 from SMI to Schenker;

(e) the minutes of meeting of 8 January 2003;

(f) an e-mail dated 10 January 2003 from Schenker to SMI and SMI’s agent;

(g) an e-mail dated 27 January 2003 from SMI’s agent to Schenker and SMI;

(h) the draft Logistics Service Agreement;

(i) an e-mail dated 4 February 2003 from Schenker to SMI’s agent; and

(j) an e-mail dated 5 February 2003 from SMI’s agent to Schenker.

32 According to the Statement of Claim,[2] in so far as the lease was made by conduct, the
conduct consisted of or was to be inferred from, inter alia, Schenker’s commencement of the following
fitting out works at the warehouse:

(a) bar code number on racking; and

(b) network cabling works on or about 22 January 2003.

33 SMI averred that by an e-mail dated 11 February 2003 and a further e-mail dated
25 February 2003, Schenker repudiated the lease and refused to be bound any longer by it.[3] In
para 13 of the Amended Statement of Claim, SMI set out the steps that it had taken to mitigate its
loss after Schenker’s repudiation and in para 14, it set out details of the loss and damage it had
suffered, totalling $606,350.

34 Schenker denied liability on three main grounds. First, Schenker alleged that whilst it had had
negotiations with SMI between October 2002 and February 2003 for a grant of a lease of the
warehouse, these negotiations had never been completed and consequently there was no concluded
contract between the parties.[4] Schenker gave particulars of the various terms on which it said the
parties had not come to agreement. Schenker averred that any oral and/or e-mail agreement reached
was to be “subject to contract” and that its solicitors would guide Schenker thereon when all the
main terms had been agreed.[5]
35 Schenker’s second line of defence was that even if there had been a concluded contract
between the parties or one that was evidenced by the exchange of e-mail correspondence and the
draft LSA, none of these exchanges complied with the requirements of s 6(d) of the Civil Law Act
(Cap 43, 1994 Rev Ed) (“the CLA”) in that there was no promise or agreement or a memorandum or
note thereof in writing and signed by the party to be bound by the agreement. Further, Schenker did
not enter into exclusive possession of the warehouse nor did it pay any rent or deposit to SMI in
respect of the renting of the warehouse. Thus, there was no legally enforceable contract.

36 Finally, in paras 12 to 15 of the Re-amended Defence, Schenker set out three conditions
precedent to which the alleged contract was subject. These conditions, it said, had not been fulfilled.
The first was that SMI had to seek the approval of JTC to lease the whole of the warehouse to
Schenker. The second was that Merck had to appoint Schenker to handle, and to provide the third
party logistics services for, Merck’s dangerous cargo. The final condition precedent was that SMI had
to obtain the consent of the UOB before it could rent out the warehouse to Schenker.

37 SMI filed a Re-amended Reply in which it contested the various points raised by Schenker’s
Re-amended Defence. It is not necessary at this stage for me to set out particulars of that pleading
as the issues emerge clearly from the first two pleadings.

The issues

38 The broad issues for decision are:

(a) Was there a concluded contract for the lease of the warehouse and, if so, when was
that contract concluded?

(b) Were the requirements of s 6(d) of the CLA met?

(c) Was performance of the contract subject to the fulfilment of any condition precedent?

First main issue: Was there a concluded contract?

39 In order for there to be a concluded contract for a lease, the essential terms of that
contract must have been agreed to unconditionally by both the prospective landlord and the
prospective tenant. It is clear from Masa-Katsu Japanese Restaurant Pte Ltd v Amara Hotel
Properties Pte Ltd [1999] 2 SLR 332 and Halsbury’s Laws of England vol 27(1) (Butterworths, 4th Ed
Reissue, 1994) at para 60 that the essential terms of such an agreement are that the premises to be
leased and the landlord and tenant must be identified, the commencement and duration of the term
must be fixed and the rent and other consideration to be paid (if any) must be agreed. The same
paragraph of Halsbury’s adds that if any other terms are mentioned by one party, these must also be
unconditionally accepted by the other in order that there may be a concluded contract. If such
additional term has not been unconditionally accepted, the matter, says Halsbury’s, “rests in
negotiation and there is no concluded contract”.

40 SMI submitted that by 4 February 2003, the parties had agreed on the essential terms. The
premises to be leased and the parties to the lease had been identified. The term of the lease had
been fixed at two years with an option to renew for a further year. It had also been agreed that the
lease would commence on 1 March 2003 and the rental payable would be $43,000 a month. Thus, the
contract was agreed on that date, if not earlier.

41 Schenker, however, submitted that not only had there been no agreement on some of the
essential terms, but also additional terms had been mentioned and the parties had not come to an
agreement on those terms on or before 4 February 2003. In particular, there was no agreement as to
the date of the commencement of the term. Further, there was no agreement on the following issues:
who had to bear stamp duty on the lease document; the types of dangerous goods that Schenker
could not store in the warehouse; the payment of interest for outstanding rent; the one-month rent-
free period requested by Schenker; and, finally, certain terms relating to the refund of the deposit
paid by Schenker.

Were the essential terms agreed?

42 From the evidence, it is clear that on 20 December 2002, when Mr Tan informed Mr Heng by
e-mail that “Schenker will proceed with the leasing of the warehouse as per our discussion”, two of
the essential terms had been agreed: the identity of the premises to be leased and the identities of
the prospective landlord and prospective tenant. Additionally, the amount of rental and the duration
of the lease were also probably agreed by then since they had been a major part of the ongoing
discussions between the parties. Even if not agreed on 20 December, these items were agreed shortly
thereafter. They were included in the handling agreement drawn up by Ms Yong and forwarded to
Mr Tan on 23 December. After vetting the handling agreement, Mr Tan wrote to Mr Heng on
30 December setting out the further items that needed to be amended or included in the draft. The
rent and the duration of the lease were not among these. So by 30 December 2002, in my view,
those items were confirmed.

43 The commencement date of the lease had been stated in the handling agreement as being
1 February 2003. Mr Tan had no direct comment on that. He did state, however, that Schenker
should be given a one-month rent-free period in order to set up its operations. That statement could
be construed as his asking for the commencement date to be a month after Schenker took possession
of the premises. In view of that possibility, there is some problem with holding that the
commencement date had also been agreed to on 30 December 2002. SMI’s position on this point, as
stated above, was that all essential terms, including the commencement date, had been agreed to by
4 February 2003. This submission was made on the basis that in cl 3 of the draft LSA, the
commencement date of the lease was specified to be 1 March 2003. On 4 February 2003, Mr Tan had
confirmed that the contents of the draft LSA were acceptable to him apart from certain wording in
cl 2. SMI therefore submitted that on that day, at the latest, Schenker had agreed to 1 March 2003
as the commencement date.

44 Schenker disputed this for four reasons. Firstly, it contended that Mr Tan’s e-mail of
4 February 2003 (as quoted in [24] above) had contained only a qualified acceptance of SMI’s
proposal via the draft LSA that the commencement date be 1 March 2003 and therefore was
insufficient to constitute the necessary agreement to an essential term. Secondly, there was no
evidence that the parties had agreed at the meeting on 27 January 2003, or at any other time, to
1 March 2003 as the commencement date. Thirdly, the parties had not agreed on the duration of the
rent-free period and therefore, since the rent-free period was to run immediately before the lease
commenced, the commencement date had not been fixed. Finally, even if the duration of the rent-
free period had been agreed to, SMI was unable to give Schenker exclusive possession of the
warehouse on a date that would enable Schenker to enjoy the full rent-free period before 1 March
2003.

45 The first reason given by Schenker involves the construction of the e-mail of 4 February 2003
from Mr Tan. Schenker submitted that that e-mail contained only a “qualified acceptance”. It did not,
however, elaborate the way in which the acceptance was “qualified”.
46 Looking at the e-mail itself, the first two paragraphs did not contain any qualification of the
main terms of the draft. The request that the words “in advance” be removed from cl 2 was not a
major item since all that Mr Tan wanted to clarify was that Schenker would have seven days from
receipt of the invoice to make payment of the rent, a matter which was not really in dispute.
Therefore, I assume that Schenker is relying on the last paragraph of the e-mail. That reads “Please
send me the amended copy and I will get it clear [sic] with my [lawyer].” If so, does that sentence
really denote a conditional acceptance of the main terms of the lease? I do not think so.

47 Mr Tan testified that by 4 February 2003, save for the point on cl 2 raised in the e-mail, he
was satisfied with the draft LSA sent by Ms Yong although he asserted that he had qualified his
acceptance by saying that he still had to get the lawyers to comment on the draft. He confirmed in
court, too, that he was also satisfied with the commercial terms of the draft and that terms like when
the tenancy would start and how long the rent-free period would last, were commercial terms that he
had the authority to decide on behalf of Schenker. Schenker did not lead any evidence or explain why
any of the commercial terms including the commencement date should be subject to its solicitors’
approval. In the e-mail itself, Mr Tan had suggested that the addendum be removed from the draft
agreement so as to avoid any difficulty with his solicitors. He also stated in court that the role of
Schenker’s solicitors was to “go through and approve the draft contract wording” before Schenker
would agree to the final wording. From all this evidence, it appears to me that Mr Tan’s qualification in
the last paragraph of the e-mail was simply that he needed the solicitors’ approval as to the language
of the written contract before he could authorise its signature. He was not qualifying his acceptance
of the essential terms of that agreement in any way.

48 The second reason, ie, that the parties did not agree on any other occasion to 1 March 2003
as the commencement date, even if correct, is immaterial once I find that that date was proposed by
SMI via the draft LSA (as Mr Tan himself testified) and accepted by Schenker via the e-mail of
4 February 2003. Those are findings I am prepared to make on the evidence. Having said that, I must
agree with Schenker’s submission that there is no satisfactory evidence that the 1 March 2003 date
was agreed to orally by the parties on or prior to 27 January 2003. Ms Yong was the only person who
gave evidence to that effect but her evidence was self-contradictory. Under cross-examination, she
stated that there was an agreement made during the meeting of 8 January 2003 for the
commencement date to be changed from 1 February to 1 March 2003. It was pointed out to her that
this consensus was not reflected in her minutes of that meeting. She then explained that she had left
it out since the minutes were to be circulated to all three parties and Richland did not need to know
the details of the agreement between Schenker and SMI. This was an odd explanation since if the
date had been agreed at that meeting, Richland would have become aware of it at the meeting itself.
Subsequently, Ms Yong said that the first commencement date of 1 February 2003 was told to her by
Mr Heng and that, likewise, he had telephoned her after meeting Schenker at a later stage, and
instructed her to change that date to 1 March. It does not seem probable from that evidence that
the change in date was discussed during the 8 January meeting. Further, neither Mr Heng nor Ms Chai
gave any evidence to support Ms Yong’s first assertion about the date being agreed on 8 January
and, significantly, neither of them said that the date had been agreed to at any time prior to the
despatch of the draft LSA on 27 January 2003.

49 The next two reasons should be considered together. They involve the duration of the rent-
free period and the granting of exclusive possession of the warehouse to Schenker. Schenker
submitted that it was common ground that the rent-free period was to run immediately before the
commencement date of the lease. Further, SMI had alleged that this rent-free period was to be from
7 to 28 February 2003. Thus, the duration of the rent-free period and those specific dates would
determine whether the commencement date of 1 March 2003 had been agreed to. The rent-free
period would also have involved Schenker taking exclusive possession of the warehouse and therefore
SMI had to adduce sufficient evidence to show that SMI was willing and able to give such exclusive
possession to Schenker as at 7 February 2003. This, Schenker submitted, SMI had not been able to
do. I will consider the arguments and the evidence.

50 The rent-free fitting-out period was first brought up on 30 December 2002. Mr Tan asked for
the handling agreement to be amended to include a one-month rent-free period in which Schenker
could set up its operations. Upon receipt of this e-mail, Mr Heng had a conversation with Mr Tan on
the matter and according to Mr Heng, they both agreed that Schenker would be allowed a two-week
rent-free period. Mr Heng then sent Mr Tan an e-mail confirming this agreement. The next day,
Mr Tan wrote to say that Schenker would try to “speed up the set up” and commence its operations
within two weeks of the handover of the warehouse but if there were circumstances beyond its
control, it might “need to get back to [SMI] to extend the free rental period up to maximum of one
month”. In court, Mr Tan maintained that this e-mail was not an acceptance of the two-week period
but a counter-proposal. There was no other correspondence on the rent-free period. Mr Heng did say
that he required management consent in order to extend the rent-free period beyond two weeks.

51 The evidence does not show any other discussion on the rent-free period between
31 December 2002 and 4 February 2003 despite the way in which the situation developed during that
period. On 31 December 2002, the proposed commencement date of the lease was 1 February 2003.
Schenker was then pressing SMI to hand over the warehouse as soon as possible because it was
eager to start operations for Merck. It became clear early in January 2003, however, that Richland
was not eager to vacate and that the start date of the lease would depend on when Richland agreed
to vacate. So, on 8 January, Schenker, SMI and Richland met to discuss this issue. At the meeting,
Schenker pressed for an early handover date as it wanted to start its fitting-out works. Richland
wanted to move out at the end of February 2003 but Mr Tan insisted on an earlier date. Eventually all
parties agreed on 6 February 2003 as the handover date. In view of Schenker’s need to start
operations as quickly as possible, Richland agreed to clear space in the warehouse by 23 January to
allow Schenker to do certain renovation work.

52 By 10 January when the minutes of the meeting were circulated to all parties, therefore,
Schenker was aware that it would only be able to take over the warehouse on 6 February. This
position remained unchanged on 27 January when Schenker and SMI met to discuss the points raised
by Schenker’s lawyers. The handover date was not discussed at that meeting. So, the fixed date
remained. It was in those circumstances that Ms Yong sent out the draft LSA proposing 1 March 2003
as the commencement date of the lease. Nothing altered between then and 9.51am on 4 February
when Mr Tan sent out his e-mail on the contents of the draft LSA and thereby accepted the
commercial terms proposed. As of then, Mr Tan was expecting to take over the warehouse in two
days’ time. His contractors had been into the warehouse and done certain cabling and bar coding
work. Under the arrangement reached with Richland, he could have sent his contractors in by then to
do renovation work had he wanted to. Mr Tan must have been aware of how long his fitting-out
works would take. If he had then expected to be given a one-month rent-free period, he would have
insisted that the lease commencement date be changed to 6 March 2003. He did not do so. He would
have known that if Schenker took over the warehouse on 6 March 2003 and the lease commenced on
1 March 2003, it would have been given only three weeks’ rent-free occupation. He did not protest
against that position nor ask for any change. In my view, he kept quiet because he had asked for four
weeks, had originally been given two, and had been willing to accept those two weeks if SMI in turn
was willing to be flexible and give a short extension in the event that the fitting-out works could not
be completed within that period. The slightly extended period of three weeks was acceptable to him. I
therefore find that when Mr Tan agreed to the commercial terms of the draft LSA he knew he was
agreeing to a rent-free period of approximately three weeks and he was happy to do so. As such, the
duration of the rent-free period as agreed was entirely consistent with the lease proper starting on
1 March 2003.

53 The fourth argument made by Schenker was that the rent-free period would have involved
Schenker taking exclusive possession of the warehouse as, otherwise, even if it occupied the
warehouse, such period of occupation could not be termed “rent-free”. Schenker submitted that SMI
had to adduce sufficient evidence to show that as at 7 February 2003, it was willing and able to give
exclusive possession of the warehouse to Schenker. It further submitted that SMI was not able to
discharge that burden because it had to do extensive rectification works in the warehouse before
handing the same over to Schenker. It relied on evidence by Mr Heng to the effect that Schenker had
not taken possession of the premises at the joint inspection on 6 February because there were some
rectification works to be done and Schenker wanted all these works to be completed before it took
over the premises. Mr Heng also confirmed that the rectification works were, in the event, only
completed on 21 March 2003.

54 SMI submitted that on this point, Schenker’s arguments were misconceived. SMI’s case was
that a valid and binding agreement for the lease had been reached by 4 February 2003 at the latest
with the agreed commencement date being 1 March 2003. It was not SMI’s case that the lease itself
had commenced on or by 7 February 2003. As such, SMI did not have to prove that it was willing and
able to give exclusive possession of the warehouse to Schenker on 7 February. I agree. Since
7 February was not the commencement date of the lease, SMI did not have to show it was in a
position to give exclusive possession of the warehouse to Schenker as of that date. On the evidence,
Richland had vacated the warehouse on 6 February and as from noon on that date, Schenker was
free to enter the warehouse and start its fitting-out operations. In fact, its contractors could have
started work on the location codes and distribution points two days earlier had Schenker wanted to
send them in then. In early January, when Mr Tan had pressed for an early handover, Mr Lim had
accepted, albeit reluctantly, 6 February as that date. It was contemplated then that the premises
would be taken over by Schenker immediately upon Richland’s vacating them. It was also agreed that
there would be a joint inspection on that same day to identify the defects that SMI would have to
rectify. It was therefore anticipated that Schenker’s fitting-out operations would take place
contemporaneously with SMI’s rectification works. This was not the usual sort of arrangement but the
circumstances were not usual since Schenker was extremely anxious to move into the warehouse and
start operations as early as possible.

55 In court, Mr Tan denied that it was expected from the start that Schenker would take over
the warehouse with those defects identified on 6 February 2003 subject to the same being
subsequently rectified by SMI. At one point of his cross-examination, he asserted that the defects
noted on 6 February were critical to the operation. For example, some of the walls were cracked and
had to be repaired and the rolling dock area had some defects. The plaster was peeling off due to
having been damaged by containers. More than 20 defects were identified and in Mr Tan’s view,
collectively, these defects were critical. Later in the cross-examination, however, Mr Tan
contradicted himself. He admitted that despite these defects, the warehouse was ready to receive
and store Merck’s dangerous goods. When it was put to him that the rectification of the defects was
not critical to Schenker’s operation of the warehouse, his answer was “I would say with certain
operational constraints that would have to be overcome”. This was a grudging concession that the
warehouse was usable. Thus Mr Tan was not a consistent witness in relation to the issue of the
handover and I do not believe that he was telling me the truth when he maintained that Schenker
could not move into the warehouse on 7 February because of the work that SMI had to do to rectify
the defects seen during the joint inspection the previous day. On the evidence as a whole, I find that
Schenker was prepared to take over the warehouse on 6 February 2003 with the defects that were
identified that day. Thus, there was no issue of exclusive possession having to be available on that
day.
Were there any other terms that had to be agreed and were not agreed as of 4 February 2003?

56 It would be recalled that in the extract from Halsbury’s quoted in [39] above, the learned
editors state that even if the essential terms of an agreement for lease have been offered and
accepted, as long as any other terms are mentioned by one party, these must also be unconditionally
accepted by the other party for there to be a concluded contract. Schenker’s submission was that
even if the essential terms here had been agreed to, there were various other additional terms that
had not been unconditionally accepted by both parties. This submission covered two types of terms.
The first type comprised comments made by Schenker’s solicitors and the second related to the
nature of the goods to be stored in the warehouse.

57 On the first area, Schenker’s stand was that the parties had not agreed on any of the
following matters that had been raised during the negotiations:

(a) whether it was SMI or Schenker who would have to pay the stamp duty on the lease
agreement;

(b) that Schenker had to pay interest to SMI on late payments at the rate of 10% per
annum;

(c) that the $86,000 security deposit payable by Schenker was to be refunded by SMI to
Schenker within seven days of the expiry or early termination of the lease agreement;

(d) Schenker’s proposal that SMI pay interest on the security deposit of $86,000 at 6% per
annum from the due date to the date of full payment if the same was not refunded to Schenker
within seven days of the expiry or earlier termination of the lease; and

(e) whether SMI should seek the approval of JTC and UOB before SMI leased the whole of
the warehouse to Schenker.

The matters set out above came from points raised by Schenker’s solicitors in their letters of advice
dated 13 January 2003 and 17 January 2003. Schenker sent copies of these letters to SMI and on
27 January 2003, the parties had a meeting to discuss the points raised. According to Schenker, no
agreement was reached on those points at that meeting.

58 Schenker’s evidence is equivocal. Mr Tan said in his Affidavit of Evidence-in-Chief that during
the meeting, he asked Mr Heng whether the latter had received copies of Schenker’s solicitors’
letters. Mr Heng confirmed that he had received those letters. Mr Tan also requested Mr Heng to seek
JTC’s approval so that SMI could lease the entire warehouse to Schenker. Mr Heng replied that there
was no necessity to obtain JTC’s approval since the draft agreement was only a service agreement
and not a tenancy agreement. Mr Tan then said that he had reservations about that and that he
would leave it to Schenker’s solicitors to look at this point again. Later that afternoon, Ms Yong sent
an e-mail to Mr Tan, Mr Heng and Ms Chai together with the draft LSA and asked all the parties to
“please seek your legal advice accordingly and have them vet/amended”.

59 Mr Heng’s evidence was that at that meeting, Mr Tan was very eager to proceed with the
commencement of the lease and did not appear to be too concerned with his solicitors’ comments on
the handling agreement. He agreed with Mr Heng that the provisions of other logistics services should
be separated from the main agreement and said that he himself would deal with the solicitors on their
comments. Also, Mr Tan was not too concerned with the issue of JTC’s consent and it was
understood that SMI would make the necessary application if required. Mr Heng thereafter instructed
Ms Yong to revise the draft agreement in accordance with what had been discussed at the meeting.

60 All that Mr Tan said about the meeting of 27 January in his evidence-in-chief has been
paraphrased in [58] above. He did not say that he had insisted that SMI accept the various
comments made by his solicitors. The draft LSA which Ms Yong subsequently sent him, a document
that Mr Heng said had been revised to cover what had been said at the meeting, did not take up any
of the six points which Mr Tan said his lawyers had raised: it did not provide for the payment of stamp
duty, the interest for late payment payable by Schenker remained at 10% per annum, there was no
provision that Schenker’s security deposit was to be refunded within seven days at the end of the
lease and no provision for SMI to pay interest on this deposit in the case of a late refund, and there
were no stipulations that SMI had to seek the approval of JTC and UOB for the lease. SMI’s position
from the document appeared to be, therefore, that it did not agree to any of Mr Tan’s suggestions
and saw no need to specify who would have to pay the stamp duty on the lease. Mr Tan went
through the draft LSA. On 4 February, he confirmed that with one exception the contents were all
right with him. He did not raise any of the six points again. It appears to me that he was not insisting
on any of these points and that he accepted SMI’s position on the same. In any case, even if he had
reservations on the points, they were not important enough for him to even ask that they be included
in the draft LSA. In the circumstances, I hold that as at 4 February 2003, these matters did not
prevent the conclusion of an agreement for lease.

61 I now turn to the second contention in this area. Schenker submitted that a vital term had
not been agreed on, to wit, there was no agreement on the classes or types of dangerous goods
which Schenker was not allowed to bring into or store in the warehouse. Schenker’s argument went
as follows. The draft LSA sent out on 27 January 2003 included an Appendix 1 containing the “Rules
and Regulations” to be observed by Schenker. Paragraph A of this appendix stated:

Not to store or bring upon the Service Area any article that are listed in the Fire Safety Bureau
(“FSB”) list of licensed products (Refer to Attachment A).

In fact, however, there was no Attachment A. Further, there was, according to the evidence given
by Mr Tan, no Government Department, statutory body, corporation or other organisation known as
the “Fire Safety Bureau”. In court, Mr Heng adduced a list of chemicals that he stated was the
Attachment A mentioned in the draft LSA. This document, marked “P1”, did not appear to have been
issued by a government agency or by a statutory body or any other organisation. Accordingly, the
parties could not have agreed on the classes or types of dangerous cargo that were not to be kept in
the warehouse.

62 Schenker’s case on this point is not convincing. Firstly, it was Mr Heng’s evidence that there
was a government body known as the Fire Safety Bureau. In the closing submissions, counsel for SMI
drew my attention to the entity known as the Fire Safety & Shelter Bureau that is part of the
Singapore Civil Defence Force. That bureau formulates and implements fire safety policies. It also
regulates fire safety standards in buildings as stipulated under the Fire Safety Act (Cap 109A,
2000 Rev Ed). As this bureau is a part of a public organisation, I can take judicial notice of its
existence and I also accept that when he was referring to the Fire Safety Bureau, Mr Heng meant the
Fire Safety & Shelter Bureau.

63 Secondly, Mr Tan conceded during cross-examination that there was no disagreement

between the parties on the classes of dangerous goods that could be stored in the warehouse. He
said, however, that there was a condition that Schenker needed the approval of the authorities in
order to store dangerous cargo in the warehouse. Mr Tan agreed that it was Schenker’s responsibility
to make the necessary application for approval. His evidence was in fact that this application had
been put in much earlier than 10 February 2003 and that Schenker had received in-principle approval
from the authorities subject to its submitting a list of classes of cargo that were to be stored in the
warehouse. Mr Tan maintained, however, that until the list was submitted and actual approval had
been granted, the condition was not satisfied. It was put to him that he had no reason to believe
that the approval would not be forthcoming. His reply was evasive: he said “I would not know. It’s up
to the authority”. Mr Tan’s evidence, therefore, did not support the submission that the parties had
not agreed on the items that could not be stored in the warehouse. Instead, his testimony
established that SMI was quite happy for anything to be stored in the warehouse for which Schenker
could get approval from the authorities and that obtaining the approval was entirely within Schenker’s
domain. If Schenker could not get approval from the authorities for any particular item, then that item
could not be put in the warehouse. I am satisfied on the facts that there was no disagreement on the
types of goods that could or could not be stored in the warehouse.

Were parties still negotiating on the basis of “subject to contract”?

64 The final submission made by Schenker in respect of the first main issue was that if the court
was to find that Schenker and SMI had reached an agreement on the proposed lease before
11 February 2003, then Schenker’s case was that the parties were negotiating on a “subject to
contract” basis. Accordingly, any agreement reached was only conditional and not binding on the
parties as the contract contemplated by such an agreement had not been signed by the parties and
exchanged between them.

65 Schenker pointed out that the letter of intent forwarded by SMI to Schenker on 5 November
2002 was marked with the words “Subject to Contract”. It was clear therefore that both parties had
started negotiations for the proposed lease on a “subject to contract” basis. Schenker submitted that
they continued negotiations on the same basis right up to 10 February 2003 because the evidence
showed the following:

(a) Schenker’s standard procedure was to send all final drafts of proposed contractual
wording to its solicitors for vetting, comment and recommendation before it agreed to any
contractual terms.

(b) This procedure was followed in the case of the draft handling agreement and the
solicitors duly advised on it.

(c) Mr Tan had informed Mr Heng that Schenker wanted to follow the advice of the solicitors
on the draft handling agreement and this conversation led to the meeting of 27 January 2003.

(d) When the draft LSA was sent out to Mr Tan, Ms Yong’s covering letter mentioned that
Schenker should obtain legal advice and Mr Tan replied on 4 February 2003 to say that he would
clear the document with Schenker’s lawyer.

(e) On 10 February 2003, Ms Yong asked Mr Tan to get the lawyers’ comments quickly.

Schenker also submitted that as SMI had a lease from the JTC and had also let out the warehouse
previously, it had experience in transactions involving immovable property and therefore must have
known about ordinary conveyancing practice. Thus, SMI knew the exact legal implications of using
the phrase “subject to contract”. Whilst the phrase was only used once, in the draft letter of intent,
that draft letter was referred to on two subsequent occasions. Schenker pointed out that in the
English High Court case of Cohen v Nessdale Ltd [1981] 3 All ER 118, the term “subject to contract”,
which appeared in correspondence dealing with earlier negotiations which had been broken off (but
not irretrievably), was held by the court to have continued to apply to negotiations when they
resumed.

66 As SMI submitted, however, the only document that was marked “subject to contract” was
the letter of intent. This was sent out at a very early stage of the negotiations. It went under cover
of an e-mail that was not itself marked “subject to contract” and was not signed by SMI. The letter
contained few terms. Only the address of the premises, date of commencement and a general range
of services were stated. The rental rate and the duration of the lease were not mentioned. That
document even if signed could never have constituted a binding agreement for lease since essential
terms were missing. It was more in the nature of a letter of comfort required by SMI so that it had
some evidence that Schenker was serious about the negotiations. The letter of intent was never
signed by either party and the two subsequent references to it were in e-mails sent in November
2002. Those e-mails were not marked “subject to contract” either. These references by Mr Heng were
in the nature of prodding Schenker to at least show some sign of seriously wanting to take a lease of
the premises. Schenker, however, refused to bite. Until it had a firm commitment from Merck, it was
not willing to sign even such an innocuous document as the letter of intent with the heading “subject
to contract”.

67 By the end of November 2002, nothing had crystallised, not even the intention of Schenker to
take the warehouse on lease. Matters only came to some shape in mid-December 2002 when Merck
gave Schenker the go-ahead and from then on parties exchanged e-mails and detailed draft
documents. None of the
e-mails or the detailed drafts were marked “subject to contract”. Schenker gave no sign to SMI that
it was negotiating on a “subject to contract” basis though it was concerned to follow its normal
procedure of obtaining lawyers’ advice on the wording of legal documents. Schenker’s attitude vis-à-
vis its lawyers was, however, clear on the evidence. Whilst such advice had to be taken, Mr Tan was
able to confirm commercial terms without referring to his lawyers. There was no evidence that
Schenker could not have contractual dealings without its lawyers’ consent. The situation here was
quite different from that which obtained in Cohen v Nessdale Ltd. In that case both parties had,
during the first part of their negotiations, used and relied on the phrase “subject to contract” in their
letters. Here the phrase “subject to contract” was used in a document at an early stage which
document was signed by neither party and totally ignored by them once negotiations really became
serious.

68 It is interesting, given its current reliance on the existence of the phrase “subject to
contract” in the letter of offer, that, instead of signing that letter in November 2002, Schenker
repeatedly asked SMI for an extension of time to execute it. Mr Tan was asked why, if he thought
that the letter of intent was not a binding document, he did not sign it in order to secure a holding
period for conclusion of the lease instead of asking for extensions of time. He did not give a direct
reply to that question. He said that Mr Heng was kept informed of negotiations between Schenker and
Merck and that Schenker wanted “to be on this understanding that we are pending Merck’s
agreement to the contract and we asked them to hold on to the warehouse”. Mr Luth testified that
the letter of intent was not a contract. He was then asked the same question as to why it was
necessary to ask for an extension of time instead of simply signing the letter. He replied that he was
not aware if there was any procedure in Schenker allowing it to simply sign a letter of intent.
Secondly, to continue negotiating with Merck he wanted to have proof that the warehouse was still
available if Schenker confirmed the contract with Merck and that was why he had asked for an
extension of time. Finally, it was suggested to Mr Luth that he had asked for an extension of time on
18 November 2002 because he did not want to commit Schenker to an agreement for the use of the
warehouse. This time he gave a direct answer and it was “I think, yes”.
69 On the evidence, it appears to me that Schenker did not place any reliance on the words
“subject to contract” in the letter of intent. I find that its view was that if it had signed the letter of
intent, it would have been bound in some way in respect of the lease and that was why it never
signed that document. It did not use the words “subject to contract” in the later negotiations or rely
on them in any way. Thus, I find that when Mr Tan accepted the terms of the draft LSA on
4 February 2003, his acceptance was not subject to contract. Mr Tan’s frame of mind can also be
gleaned from his statement in his messages sent after Merck shocked Schenker by pulling out of the
agreement. In the e-mail of 11 February 2003, he referred to Schenker having “acquired the DG
warehouse” on the assumption that Merck would be its main customer. Obviously, at that time,
Mr Tan thought that Schenker already had rights to the warehouse.

Second main issue: Were the requirements of s 6(d) of the Civil Law Act complied with?

70 The second main line of defence put forward by Schenker was that even if there was a
concluded contract, this was not enforceable because of the effect of two pieces of legislation, the
CLA ([35] supra), and the Electronic Transactions Act (Cap 88, 1999 Rev Ed) (“the ETA”).
Section 6(d) of the CLA, the modern re-enactment of the UK Statute of Frauds 1677 (c 3), requires,
among other things, that for a lease of land to be enforceable there must exist some written
memorandum or note evidencing the terms of the agreement and this document must be signed by
the person against whom the contract is to be enforced. As for the ETA, Schenker made reference to
ss 6 to 9 of this Act which give recognition to and regulate electronic records generally and to ss 11
to 15 of the CLA which give recognition to and regulate electronic contracts. In particular, ss 7 and 8
of the ETA provide that an electronic record or signature satisfies any rule of law requiring writing or
signature. It submitted, however, that these sections, by virtue of s 4(1)(d) of the ETA, do not apply
to any rule of law requiring writing or signatures for various matters including any contract for the
sale or other disposition of immovable property or any interest in such property.

71 In Schenker’s submission, the requirements of the CLA had not been satisfied. It pointed to
para 7 of the Amended Statement of Claim which had averred that this lease was contained in or
evidenced by the ten documents listed in that paragraph (see [31] above). It asserted that those
documents did not qualify as notes or memoranda in writing as required by the CLA. All of them were
e-mail correspondence exchanged between Schenker and SMI. Further, all written communication
between the parties was made via electronic means. No hard copy of any letter or document was
ever sent by either one to the other. Schenker contended that the e-mail correspondence was not
capable of constituting the written evidence of the lease as required by s 6(d) of the CLA. Whilst s 7
of the ETA provided that where a rule of law required information to be in writing, an electronic record
would satisfy that rule of law as long as the information contained therein was accessible so as to be
usable for subsequent reference, and s 8 provided for electronic signatures to satisfy a rule of law
requiring a signature, those sections did not apply to the lease because of the operation of s 4(1) of
the ETA.

72 In order to meet these arguments, SMI had to establish two things: first, that there was a
sufficient note or memorandum to satisfy s 6(d) of the CLA and second, that such note or
memorandum could be considered to be in writing and signed by Schenker or its representative even
though it was in an electronic form. SMI made only cursory submissions on the first point, probably
because Schenker did not emphasise it either. The court, however, has to be concerned with it
because it is established law that for a memorandum evidencing a lease to satisfy s 6 of the CLA,
that memorandum must contend all the material terms of the contract including the identities of the
parties, the description of the subject matter, and the nature of the consideration.

Was there a sufficient memorandum?

73 Paragraph 7 of the Amended Statement of Claim specifies ten documents as being the written
evidence of the lease. That is a very broad pleading as even a cursory perusal of the list shows that
seven of the documents emanated from SMI or Ms Yong and therefore could not, on their own,
constitute a memorandum signed by Schenker. Further the contents of most of the documents
specified reflected on-going negotiations rather than a concluded agreement. The list even includes
Mr Heng’s e-mail of 5 November 2002 forwarding the form of the letter of intent to Schenker.
Considering that that document was marked “Subject to Contract” there is no way that, even if it
had been signed, it could have served as a memorandum of agreement for the purpose of s 6 of the
CLA. When it came to submissions, SMI was not more specific. It submitted that all the e-mail
correspondence and the attachments to the same, including the draft LSA, when read together,
constituted the memorandum. I cannot accept this submission for the reasons given. Luckily for SMI,
however, despite their failure to properly identify the documents constituting the memorandum,
having looked through all the correspondence, I consider that Ms Yong’s e-mail of 27 January 2003
together with its attachment, the draft LSA, and Mr Tan’s reply to Ms Yong dated 4 February 2003
accepting the terms of the draft LSA, would together constitute the necessary memorandum. This is
because all the agreed terms are reflected in those documents when read together and these include
the essential terms for a lease, and also, one of the e-mails is a specific acceptance by Mr Tan on
behalf of Schenker of the proposed terms. It is established law that the plaintiff may rely on two or
more documents to constitute the necessary memorandum (see Halsbury’s Laws of Singapore, vol 7
(Butterworths Asia, 2000) at para 80.133).

Can e-mail correspondence be considered to be “in writing”?

74 On this second point, Schenker’s argument is founded on s 4(1)(d) of the ETA. That section
provides:

Parts II and IV shall not apply to any rule of law requiring writing or signatures in any of the
following matters:

(d) any contract for the sale or other disposition of immovable property, or any interest
in such property; …

Schenker submitted that since the sections, which provide that an electronic record or signature
satisfied any rule of law requiring writing or a signature, appeared in Parts II and IV of the ETA, the
intention of the ETA was that it would not permit such electronic record or signature to satisfy the
rule requiring a contract for the disposition of an interest in property to be in writing.

75 In response, SMI submitted that the effect of s 4(1)(d) of the ETA is that, in respect of a
contract for the sale or other disposition of immovable property, or any interest in such property, one
cannot rely on the provisions of the ETA, namely the provisions under Parts II and IV thereof, that
enable electronic records and signatures to satisfy legal requirements for writing and signature. This
is, however, it contended, different from saying, as Schenker did, that by virtue of s 4(1)(d) of the
ETA, the e-mails do not satisfy the requirements for writing and signature under s 6(d) of the CLA. As
prescribed by s 3 of the ETA, the ETA should be construed consistently with what is commercially
reasonable under the circumstances and to give effect to its main purpose of facilitating electronic
commerce. As the ETA was passed to enable reliance on electronic communication in commerce, this
statute should not be construed as disabling such reliance.

76 Having looked at the provisions of the ETA, I agree with the submissions made by SMI. Whilst
the statute does make it plain that electronic records will be adequate to satisfy legal rules relating to
writing and signature in most commercial matters, its conservative approach in not extending these
provisions to contractual matters falling within s 6 of the CLA does not mean that, as a matter of law,
electronic means of communication cannot satisfy the requirements of s 6. The ETA does not change
the common law position in relation to s 6 of the CLA. Whether an e-mail can satisfy the requirements
for writing and signature found in that provision will be decided by construing s 6(d) of the CLA itself
and not by blindly relying on s 4(1)(d) of the ETA. This is a view that has supporters. As part of their
review of the ETA, on 25 June 2004, the Infocomm Development Authority of Singapore and the
Attorney-General’s Chambers released a public consultation paper dealing with the exclusions under
s 4 of the ETA. Paragraphs 2.1.3 and 2.1.5 of the consultation paper state:

2.1.3 The effect of section 4 is that, in such excluded transactions, one cannot rely on the
provisions in the ETA that enable electronic records and signatures to satisfy legal requirements
for writing and signature. For example, sections 6 and 7 of the Civil Law Act impose legal
requirements for writing and signature in the case of certain land transactions and for trusts
respectively.

2.1.5 Even where legal form requirements apply, exclusion under section 4 of the ETA
may not necessarily prevent such transactions from being done electronically. Electronic
records or signatures could still possibly satisfy the legal requirements without reliance on the
provisions of the ETA. It would be a matter for legal interpretation whether an electronic form
satisfies a particular legal requirement for writing or signature. Some legislative provisions, by
reason of their detailed specifications, would clearly exclude the use of electronic means even if
the ETA were applicable. ...

77 I now turn to the provisions of s 6(d) of the CLA. In respect of the requirements for writing
and signature, this subsection simply states that the “promise or agreement” or a “memorandum or
note thereof” must be “in writing” and “signed by the party to be charged therewith”. SMI submitted
that this language did not mean that the use of electronic forms was excluded. By way of contrast, it
pointed to other legislative provisions where the requirements for writing or signature come with
certain specifications. For example, in s 6(2) of the Wills Act (Cap 352, 1996 Rev Ed) it is provided
that every will has to be signed “at the foot or end thereof” by the testator who has to sign the will
in the presence of two or more witnesses who are present at the same time. Secondly, para 17 of the
Third Schedule of the Land Titles (Strata) Act (Cap 158, 1999 Rev Ed), specifies that an instrument
appointing a proxy has to be in writing “under the hand” of the appointer or his attorney and in the
case of a company, the instrument has to be under seal or “under the hand” of an officer of the
company. The third example cited was the requirement in s 40(2)(b) of the Companies Act (Cap 50,
1994 Rev Ed) that an alteration made in the memorandum or articles of association of the company
has to be indicated “in ink” on a printed copy of the memorandum or articles. In these three cases
and others like them, the use of electronic forms would, necessarily, be precluded. That, argued SMI,
was not the case with s 6(d) of the CLA. It did not require handwriting or a signature in a certain
place in the presence of certain people or the writing to be in ink. All it required was for the document
concerned to be “in writing”.

78 Section 2 of the Interpretation Act (Cap 1, 2002 Rev Ed) provides the following definition of
“writing”:

“writing” and expressions referring to writing include printing, lithography, typewriting,

photography and other modes of representing or reproducing words or figures in visible form.

Referring to this definition, SMI submitted that it included not only the specific forms of writing
mentioned but also the natural meaning of that term. It argued that the natural meaning should be
construed to reflect technological developments since one of the canons of statutory construction is
that there is a presumption that “Parliament intends the court to apply to an ongoing Act a
construction that continuously updates its wording to allow for changes since the Act [in this case,
the CLA] was initially framed (an updating construction). While it remains law, it is to be treated as
always speaking” (see Bennion, Statutory Interpretation (Butterworths, 4th Ed, 2002) at p 762).
Thus, the definition of “writing” can be extended to include modes that were not in existence at the
time the Interpretation Act was enacted but are available at the date of interpretation.

79 In any case, SMI submitted that e-mails can be classified as falling within the meaning of
“other modes of representing or reproducing words … in visible form”. This is because although in their
transmitted/stored form, e-mails are files of binary (digital) information, they also have another form
when they are displayed on the monitor screen. At that stage, they are “words in a visible form”. The
sender of an e-mail is able to see the text that he has created on the screen of his computer monitor
before the message is sent. Similarly, the recipient is able to view the message on his own screen. A
visible representation of the words which form the message is therefore available to both the sender
and the recipient. The same is true of any attachment that is sent, opened and read. Thus while the
underlying digital information will not be “writing”, the screen display will satisfy the Interpretation Act
definition. The sender or the recipient or both may also print out the message and any attachment.
This was what happened in the present case, given that the e-mails and the attachments were
disclosed in the list of documents filed both by Schenker and SMI in these proceedings. Further,
printed copies of the e-mail correspondence were contained in the agreed bundle.

80 I find the above submissions, based on the observations of the UK Law Commission in an
advisory paper entitled Electronic Commerce: Formal Requirements in Commercial Transactions
(December 2001) (“the advisory paper”), to be persuasive. The aim of the Statute of Frauds was to
help protect people and their property against fraud and sharp practice by legislating that certain
types of contracts could not be enforced unless there was written evidence of their existence and
their terms. Recognising electronic correspondence as being “writing” for the purpose of s 6(d) of the
CLA, would be entirely consonant with the aim of the CLA and its predecessor, the Statute of Frauds,
as long as the existence of the writing can be proved.

81 In this case, the parties readily admitted that they had sent and received each other’s e-mail
messages. No one argued or testified that the printed copies of the e-mails that appeared in the
bundle of documents were not true copies of the e-mails that they had seen on-screen and
responded to electronically. Neither Mr Tan nor Mr Luth objected to the contents of the printed
copies of their respective e-mail messages. In fact, they confirmed that they had sent out those
various messages and attached the printouts as exhibits to their respective affidavits. Mr Tan did not
resile from any of his e-mails. He did not deny receiving the e-mail messages and attachments sent
by Mr Tan and Ms Yong (in particular he did not deny receiving Ms Yong’s e-mail of 27 January 2003
and the draft LSA that was an attachment to that e-mail). He specifically confirmed he had sent out
his response in the e-mail of 4 February 2003 and commented in court on the contents of that e-mail.

82 I should also state that counsel for SMI has been able to buttress its arguments by citing the
views of foreign law commissions and foreign courts. In the UK, the definition of “writing” as found in
the Interpretation Act 1978, Schedule 1 is in pari materia with the Singapore definition as cited in
[78] above. The UK Law Commission’s view, as expressed in the advisory paper, is that e-mails satisfy
the definition of “writing” under the Interpretation Act and the functions of writing, although it
recognises that there is a lack of consensus on the issue. In particular, the UK Law Commission has
commented (at para 3.17):
 A number of commentators have expressed the view that the Interpretation Act definition of
writing requires there to be some physical memorial, meaning that an electronic communication
cannot satisfy a writing requirement. We do not share this view. First, the creation of a physical
memorial is just one function of paper-based writing: it is not clear that it is one of the more
important functions. Secondly, in practice, both parties will usually be able to store and to print a
copy of an electronic communication.

83 In the US, the Court of Appeals of Iowa had to consider in Wilkens v Iowa Insurance
Commissioner 457 NW 2d 1 (Iowa App 1990) whether an insurer had complied with the requirements
of the Iowa Insurance Code § 515.57 which provided that an insurance company had to keep a
“written record” of each insurance policy it issued. The insurer concerned had maintained the required
information in its computer system. The insurance commissioner considered that the insurer had kept
adequate records on the relevant business and that nothing in § 515.57 precluded the keeping of
these records in a computer. This determination was challenged before the Court of Appeals. The
court held that since the enactment of § 515.57 in 1939, methods of doing business had changed
considerably and the advent of the computer age had resulted in businesses making substantial
changes in record-keeping procedures. The court noted that the insurance commissioner, who was
the person charged with the responsibility of assuring that insurance company procedures complied
with statutes, had determined that the records as kept were sufficient for his purposes. The court
found no reason to interfere with the commissioner’s decision on the issue. Although the court did not
say so expressly, it must have considered a computer record to be a “written record”.

84 In another American case, this time decided by the District Court for South Carolina, it was
held that a computer floppy diskette could constitute “written notice” to an insured’s agent under the
terms of a statute. Delivering his judgment in Clyburn v Allstate Insurance Company 826 F Supp 955
(DSC 1993), Senior District Judge Blatt noted that the information on the floppy diskette could be
retrieved and printed as “hard copy” on paper and stated that in today’s “paperless” society of
computer-generated information, the court was not prepared, in the absence of a legislative
provision, to find that a computer floppy diskette would not constitute a “writing” within the meaning
of a statute that required written notice of the cancellation of a policy to be given to the insured.

85 I therefore find that the e-mail correspondence which constituted the memorandum of the
contract (as specified in [73] above) was “in writing” for the purpose of s 6(d) of the CLA. I am
pleased to be able to come to this conclusion which I think is dictated by both justice and common
sense since so much business is now negotiated by electronic means rather than by letters written on
paper and, in the future, the proportion of business done electronically will only increase. I think that
the ordinary man in the street, who not only conducts business via computer but who is being
encouraged to use technology in all areas of life and to become more and more technologically
proficient, would be amazed to find that the law would not recognise a contract he had made
electronically even though all the terms of the contract had been agreed and the parties were
perfectly ad idem. If parties who negotiate electronically do not wish to be bound until a formal
document is signed, they can have recourse to the “subject to contract” endorsement that can easily
be added to their e-mail correspondence.

Was Mr Tan’s e-mail of 4 February 2003 signed?

86 Schenker drew my attention to the evidence of Mr Tan and Mr Luth that neither of them had
ever signed a letter or any document during the period of negotiation with SMI. Mr Heng had also
agreed that no “hardcopy” letter or document was ever exchanged between himself and the
representatives of Schenker during that period. Thus, Schenker submitted, there was no memorandum
that had been signed by someone lawfully authorised to sign on its behalf.
87 SMI’s response to this submission was that the common law takes a pragmatic approach as
to what will satisfy a signature requirement. The courts look to whether the method of signature used
fulfils the function of a signature, viz demonstrating an authenticating function, rather than whether
the form of signature used is one which is commonly recognised. This approach is reflected in a
passage in Cheshire, Fifoot and Furmston’s Law of Contract – Second Singapore and Malaysian
Edition (Butterworths Asia, 1998) by Prof Andrew Phang (at p 368) which states that the word
“signature” has been very loosely interpreted: it need not be at the foot of the memorandum and it
need not be a signature in the popular sense of the word, a printed slip may suffice if it contains the
name of the defendant. SMI submitted that the typed names of Schenker’s authorised
agents/representatives “Tan Tian Tye” and “Roman Luth” in the e-mails sent by them to SMI’s
personnel were sufficient to satisfy the signature requirement under s 6(d) of the CLA. This was
because the authenticating intention of the “signatories” had been clearly demonstrated.

88 In support of its arguments, SMI cited various authorities in Australia and the US where
electronic communications were held to have satisfied the signing requirements. It noted too that the
UK Law Commission also held the view that the typing of a name into an e-mail is capable of
satisfying a statutory signature requirement (see paras 3.28, 3.29 and 3.34 of the advisory paper).
For present purposes, the most relevant cases are two fairly recent decisions from the US.

89 The first one is the Massachusetts case of Shattuck v Klotzbach 14 Mass L Rep 360 (2001).
In that case, the plaintiff brought an action to enforce a contract for the sale of a dwelling house.
The defendant pleaded a statutory provision entitled “the statute of frauds” (Massachusetts General
Laws ch 259, § 1) the language of which is very similar to that of s 6(d) of the CLA. This statute also
requires a contract for the sale of land to be evidenced by a memorandum “in writing and signed by
the party to be charged therein”. The negotiations between the plaintiff and the defendant had taken
place by e-mail and the defendant contended that the e-mails were not signed and therefore could
not satisfy the statute of frauds. The Superior Court of Massachusetts held:

“A memorandum is signed in accordance with the statute of frauds if it is signed by the person to
be charged in his own name, or by his initials … or by a printed, stamped or typewritten
signature, if signing in any of these methods he intended to authenticate the paper as his act.” …
Here, all e-mail correspondences between the parties contained a typewritten signature at the
end. Taken as a whole, a reasonable trier of act could conclude that the e-mails sent by the
defendant were “signed” with the intent to authenticate the information contained therein as his
act.

Moreover, courts have held that a telegram may be a signed writing sufficient to satisfy the
statute of frauds … This court believes that the typed name at the end of an e-mail is more
indicative of a party’s intent to authenticate than that of a telegram as the sender of an e-mail
types and sends the message on his own accord and types his own name as he so chooses. In
the case at bar, the defendant sent e-mails regarding the sale of the property and intentionally
and deliberately typed his name at the end of all such e-mails. A reasonable trier of fact could
conclude that the e-mails sent by the defendant regarding the terms of the sale of the property
were intended to be authenticated by the defendant’s deliberate choice to type his name at the
conclusion of all e-mails.

90 In the second case, Cloud Corporation v Hasbro, Inc 314 F 3d 289 (2002), which also
involved the statute of frauds under the Uniform Commercial Code in relation to a commercial
transaction, the US Court of Appeals for the Seventh Circuit held that the e-mails sent by the
defendant’s representative plus a notation signed by another member of the staff satisfied the
requirement that the quantity term in a contract for the sale of goods for more than US$500 had to
be memorialised in a writing signed by the party sought to be held to that term. The court noted that
the e-mails contained no signature but stated that like the court in Shattuck v Klotzbach, it had
concluded that the presence of the sender’s name on an e-mail would satisfy the signature
requirement of the statute of frauds.

91 I am satisfied that the common law does not require handwritten signatures for the purpose
of satisfying the signature requirements of s 6(d) of the CLA. A typewritten or printed form is
sufficient. In my view, no real distinction can be drawn between a typewritten form and a signature
that has been typed onto an e-mail and forwarded with the e-mail to the intended recipient of that
message.

92 One minor difficulty in this case is that Mr Tan did not append his name at the bottom of any
of his e-mail messages. All his e-mail messages, however, including the message dated 4 February
2003 and sent to Ms Yong, had, near the start thereof, a line reading “From: “Tan Tian Tye” <tian-
tye.tan @schenker.com>”. Mr Tan confirmed in court that he had sent out those messages. There is
no doubt that at the time he sent them out, he intended the recipients of the various messages to
know that they had come from him. Despite that, he did not find it necessary to identify himself as
the sender by appending his name at the end of any of the e-mails whether the messages were sent
to his colleagues or to third parties like Mr Heng. I can only infer that his omission to type in his name
was due to his knowledge that his name appeared at the head of every message next to his e-mail
address so clearly that there could be no doubt that he was intended to be identified as the sender
of such message. Therefore, I hold that the signature requirement of s 6(d) is satisfied by the
inscription of Mr Tan’s name next to his e-mail address at the top of the e-mail of 4 February 2003.

93 I recognise that one person’s e-mail facility can, in some cases, be accessed by a third party
who can then send out messages which purport to be authentic messages from the owner of that e-
mail address. If that happened, the owner of the address would be entitled to dispute the
authenticity of the messages purportedly sent by him. That is not the case here. Further, such
dispute would be as to the person who initiated the message and would not be decided on the basis
of whether the message bore a signature.

Part performance

94 As an alternative, SMI submitted that there were sufficient acts of part performance such
that the lease could nevertheless be enforced even if I were to hold that the requirements of s 6(d)
of the CLA had not been complied with. Schenker’s response was that SMI was not entitled to make
that argument as it had not pleaded part performance in answer to Schenker’s plea of non-compliance
with the statute. This submission of Schenker is well founded. To rely on the doctrine of part
performance, SMI would have had to specifically plead it in answer to Schenker’s averment and would
also have had to plead particulars of the acts of part performance on which it relied. The reply filed
by SMI was a long document containing some 17 paragraphs. None of these paragraphs dealt with
part performance or set out the acts of part performance on which SMI relied. Whilst in the
Statement of Claim SMI did set out details of certain conduct of the parties, these averments were
made in the context of an assertion that such conduct evidenced the making of the contract. There
was no assertion that the conduct constituted part performance of a concluded oral contract. In the
circumstances, if I had found that the requirements of s 6(d) had not been met, I would have held
that the doctrine of part performance was not available to SMI to overcome the defence raised by
Schenker.

Third main issue: Was performance of the agreement for lease subject to any condition
precedent that was not fulfilled?
Was it a condition precedent to the lease that Merck had to appoint Schenker to handle, and provide
third party logistics services for, Merck’s dangerous goods?

95 In its Defence, Schenker pleaded that if there was an enforceable contract, then that
contract was subject to a condition precedent that Merck had to appoint Schenker to handle, and to
provide third party logistics services for, Merck’s dangerous cargo. In further and better particulars of
the Defence served by Schenker, it elaborated that the condition regarding Merck’s appointment of
Schenker was not an express term of the contract but was an implied term.

96 The principles which the court has to follow when deciding whether or not any particular term
should be implied into a contract are well established. Schenker quoted Chitty on Contracts (Sweet &
Maxwell, 28th Ed, 1999) at para 13-004 for the proposition that an implication may be made in two
situations: “first, where it is necessary to give business efficacy to the contract, and, secondly,
where the term implied represents the obvious, but unexpressed, intention of the parties”. In a later
paragraph (para 13-007), Chitty comments that the term will not be implied unless the court is
satisfied that both parties would, as reasonable men, have agreed to it had it been suggested to
them. To this, I would simply like to add that one must not forget the observation of the Court of
Appeal in Hiap Hong & Co Pte Ltd v Hong Huat Development Co (Pte) Ltd [2001] 2 SLR 458 that the
touchstone for the implication of terms is necessity and not merely reasonableness, and that a
necessary term to be implied must always be equitable and reasonable.

97 The first matter to consider is whether the term to be implied was necessary for the business
efficacy of the lease. One can see that from Schenker’s point of view, the Merck contract was
essential to the commercial sense of the lease. At the end of 2002 and the beginning of 2003, it did
not need the warehouse for its usual business. It only needed it for the purpose of servicing the
business it believed it would be getting from Merck. That must be why Mr Tan testified that the Merck
contract was critical to the execution of the lease. From SMI’s point of view, however, it made no
difference whose goods were put into the warehouse once it was on lease to Schenker. There was no
term in the draft LSA restricting the use of the warehouse to the storage of Merck’s goods. SMI
would have had no legal basis to prevent Schenker from receiving goods in the warehouse simply
because those goods belonged to someone other than Merck. The essential element of a lease from
the point of view of the lessee is that it allows that lessee to have undisputed possession and control
of the premises leased subject only to certain agreed and specified restrictions. Merck’s decision to
pull out of its arrangement with Schenker did not in any way lessen the possession and control of the
warehouse that Schenker would have obtained had it proceeded with the lease. The efficacy of the
lease was not affected by Merck’s disengagement, only, possibly, the profitability of the transaction
to Schenker.

98 Even if I am wrong on this, however, Schenker faces the difficulty that it cannot establish
that it was the intention of both parties that the lease would be subject to Schenker’s obtaining the
Merck contract and that, accordingly, if SMI had been asked in express terms at the relevant time
whether the lease was subject to the Merck contract it would have unhesitatingly given an
affirmative reply. The evidence was that in November 2002, SMI was continually pressing Schenker to
give a commitment regarding the lease but that Schenker refused to do so until it had firmed up its
arrangements with Merck. On 18 November 2002, Mr Heng noted that Schenker was waiting for its
customer to revert on the matter and indicated that whilst SMI was willing to give Schenker a short
extension of time, if there was no commitment on Schenker’s part, SMI would have to offer the
warehouse to other interested parties. Another extension, on the same basis, was given to Schenker
on 25 November 2002. I note Mr Luth agreed that Schenker was repeatedly holding back on
confirming its intention to proceed with the lease of the warehouse until it was certain that it had
Merck’s business. Then, on 19 December 2002, Mr Tan had a conversation with Mr Ho of Merck and,
immediately thereafter, told Mr Heng that Merck was awarding the contract for handling of its
dangerous goods to Schenker and that Schenker would therefore like to lease the warehouse from
SMI. Although in his affidavit Mr Tan said that he cautioned Mr Heng that at that time he had not
received any written confirmation from Merck, his e-mail to Mr Heng the next day did not contain any
such caution. Instead, it said that it served to confirm that Schenker “will proceed with the leasing of
the warehouse as per our discussion” and asked for the warehouse to be handed over by 15 January
2003.

99 I am satisfied on the evidence that, from that time right up to 11 February 2003, Schenker
was confident that it was getting the Merck business and thus did not impose any condition
precedent relating to that business on the proposed lease. Nor did it inform SMI that it considered the
lease to be conditional on the Merck contract. Instead, it gave SMI the impression that the Merck
contract was secured or as good as secured and therefore it was able to commit itself to the lease
once all the terms had been agreed. In these circumstances and given that SMI had always pressed
Schenker for a commitment and had never indicated that it was willing to forgo marketing the
warehouse to others indefinitely without such a commitment, I find that SMI would not have agreed
to make the lease conditional upon Schenker’s receipt of the Merck contract.

100 I should also add that it appears to me that Schenker itself was not keen on a conditional
contract. It did not sign the letter of intent because it did not want even the slightest possibility of
being bound prior to receipt of confirmation from Merck. It could have expressly made the lease
conditional on its signing of its contract with Merck but it never even suggested that this be done.

101 In all the circumstances, I am unable to imply that the lease was subject to an implied
condition precedent that Schenker would get the contract to handle Merck’s dangerous goods.

Was JTC’s approval a condition precedent to the lease?

102 In para 12 of the Re-amended Defence, Schenker stated its case that if there was an
enforceable contract concluded between SMI and Schenker, that contract was subject to a condition
precedent that SMI had to seek the approval of the JTC to lease the whole of the premises to
Schenker. The pleaded particulars of this assertion stated, firstly, that the land upon which the
warehouse was built belonged to the JTC, secondly, that JTC required SMI to seek its consent before
SMI could lease the whole or part of the premises to any tenant, and thirdly, that SMI did not obtain
or was not able to obtain the consent of the JTC to lease the whole of the warehouse to Schenker.
Schenker subsequently pleaded that this condition precedent was an implied term.

103 In para 9 of its Re-amended Reply, SMI denied that the approval of the JTC was a condition
precedent to the lease. It admitted that the JTC owned the premises and also admitted that SMI had
to seek JTC’s consent before leasing the whole of the premises to any tenant. SMI then said that if
Schenker had not repudiated the lease, SMI would have been able to obtain JTC’s consent as a
matter of course upon payment of the requisite sub-letting fee. SMI further pleaded that Schenker
was estopped from denying that it had the title or right to grant the lease. This estoppel argument
was not, however, pursued in the closing submissions.

104 In its closing submissions, Schenker did not press the point that JTC’s approval was a
condition precedent to the commencement of the lease. This was wise as there was no evidence that
the parties had agreed to make such approval a condition precedent. At the most, there was an
understanding that approval would be applied for if required. In that case, there would be an implied
condition subsequent that approval would be obtained if necessary. Schenker’s concern at that time
to have the premises available as soon as possible must not be forgotten. It therefore did not press
for the inclusion of conditions precedent even in relation to JTC’s approval.

105 Schenker concentrated in its submissions on trying to establish that SMI had no intention of
applying to JTC for the requisite approval. It asked me to disbelieve the statements of Mr Heng and
Ms Chai that if it was necessary to obtain JTC’s consent, SMI would have applied for the same. These
statements, it said, were afterthoughts and, at the relevant time, SMI had not been willing to seek
JTC’s approval.

106 Schenker pointed out that the issue of JTC’s consent had been raised at the meeting on
27 January 2003 and that no agreement on the issue had been reached then. Ms Chai had given
testimony to this effect. Mr Heng’s evidence was that at the meeting he had said that there was no
necessity to obtain JTC’s approval since the handling agreement was only a service agreement and
not a tenancy agreement. Ms Chai also testified that at the meeting she had advised Mr Tan that the
approval of JTC might not be necessary as SMI was in the business of providing warehouse facilities.
Ms Annie Hsieh, an officer from the JTC, gave evidence that Ms Chai had called her in early 2003 to
find out whether, if SMI provided third party logistics services to another party, JTC’s approval was
required. Ms Hsieh had understood third party logistics services to mean warehousing at SMI’s
warehouse coupled with logistics services for SMI’s customers and had told Ms Chai that it was not
necessary for JTC to approve such activity. She also said that Ms Chai had not asked her whether
JTC’s approval was necessary for a sub-letting of the warehouse.

107 SMI submitted that Ms Chai’s evidence in court had been taken out of context. That evidence
did not reveal that SMI was unwilling to seek JTC’s approval. The reason for Ms Chai’s answer that
there was no agreement at the meeting for SMI to seek JTC’s approval was that she had thought this
approval was not necessary because SMI was providing not only warehousing facilities but also other
third party logistics services. That was why she had consulted Ms Hsieh. SMI noted that it was also
Ms Chai’s evidence that if JTC’s approval was necessary, SMI would have applied for and obtained it
and that this evidence had not been challenged by counsel for Schenker. SMI emphasised that
Ms Hsieh’s evidence was that JTC would have granted approval for the lease to Schenker. She had
been asked about a letter which Ms Chai had sent her on 27 June 2003 seeking JTC’s consent to the
proposed lease to a replacement tenant, OCWS Logistics Pte Ltd. Ms Hsieh had then said that on the
assumption that the reasons set out in that letter had been given in relation to an application in
January 2003, JTC would have consented to a sub-letting of the whole of the warehouse.

108 Having considered all of the evidence, I find that there is no evidence that SMI was not
willing to do what was necessary to obtain JTC’s consent. In January 2003, its officers thought that
because logistics services were being provided in addition to the leasing of the warehouse, no
consent would be required. This was based on their previous experience with the occupation of the
warehouse by Richland. Whilst they did not agree specifically at the 27 January 2003 meeting to seek
such consent, they did not refuse to ask for it either. I accept the evidence that once it had become
clear to SMI that the contract between itself and Schenker required JTC’s approval, it would have
gone ahead to apply for such approval. It was clear from the conduct of SMI’s staff both in January
2003 and subsequently that SMI was concerned about JTC’s opinion and was not intent on flouting
any of JTC’s regulations. I therefore find that if Schenker had not repudiated the lease, SMI would
have made the necessary application. I also find that, on the balance of probabilities, SMI would have
been able to obtain the requisite consent from JTC had it made the application and would thereby
have been able to satisfy any implied condition in the lease as to the obtaining of the superior
landlord’s consent to the sub-letting.

Was UOB’s approval a condition precedent to the lease?

109 Paragraph 14 of the Re-amended Defence stated Schenker’s position that if there was an
enforceable contract between it and SMI, that contract was subject to the condition precedent that
SMI had to seek the consent of UOB before it could rent out the whole of the warehouse to
Schenker. The particulars given of this averment were that, firstly, SMI had mortgaged its interest in
the warehouse to UOB, secondly, that UOB required a mortgagor to seek its consent before renting
out the mortgaged premises, and thirdly, that SMI had failed and/or neglected to seek such consent
from UOB. In further and better particulars it was pleaded that there was an implied term in the lease
that the consent of UOB would be obtained as a condition precedent.

110 It was common ground that the mortgage document executed by SMI contained a covenant
that SMI would not lease, or part with the possession of, the warehouse or any part thereof without
UOB’s prior written consent. Schenker submitted that there was no evidence that SMI had sought
UOB’s approval for the lease to Schenker or that consent to such lease had been given by UOB. In
her Affidavit of Evidence-in-Chief, Ms Chai had stated that she believed SMI would have, as a matter
of course, obtained the requisite consent to the lease. When she was cross-examined, however, she
stated that no agreement had been reached at the 27 January 2003 meeting for SMI to seek UOB’s
approval for the lease.

111 Ms Chai had also testified in her Affidavit of Evidence-in-Chief that there was never any
agreement that the lease would be subject to the condition precedent that UOB’s approval would
have to be obtained. If it had not been for Schenker’s repudiation, however, SMI would have sought
such consent in due course. She also stated that UOB’s policy regarding sub-letting was that if there
were no breaches of the mortgage, UOB would grant consent to SMI as a matter of course, subject
to SMI assigning the rental proceeds to SMI’s account with UOB. Schenker submitted that this
statement was not quite correct since, in July 2003, when asked to approve the proposed lease with
OCWS Logistics Pte Ltd, UOB imposed the additional condition that JTC’s approval had to be obtained
prior to the sub-letting. When this was put to Ms Chai in cross-examination, she agreed that the
bank’s approval was subject to JTC also approving the lease. Schenker further submitted that its
request that SMI seek the approval of UOB had been proposed by its solicitors and therefore such
approval was a condition precedent to the purported lease.

112 SMI’s rejoinder was that it was not a condition precedent to the lease that UOB’s approval be
given but that it would have obtained such consent in the normal course had it not been for
Schenker’s early termination.

113 In my view, there was no evidence that it was a condition precedent to the lease that UOB’s
approval must be obtained. Although this requirement was mentioned in Schenker’s solicitors’ letter,
Mr Tan did not make it a condition precedent when he accepted the terms of the draft LSA. Nor was
there any agreement to this effect at the meeting of 27 January 2003. In relation to the issue
whether such consent would have been granted in any case, Ms Chai had testified that as a matter
of course, SMI would have applied for and obtained UOB’s approval if not for the early termination of
the lease by Schenker. Schenker did not directly challenge that evidence. It asked me to disbelieve it
because of the additional sub-condition that UOB imposed in regard to JTC’s consent. That is not a
reason for me to disbelieve Ms Chai’s unchallenged evidence. She also testified that at the material
time, SMI was not in breach of the mortgage with UOB and therefore should have been able to get
UOB’s consent. The assertion that SMI was not in breach of its mortgage was not challenged either.
The evidence showed that when SMI applied for UOB’s consent to its lease to OCWS Logistics Pte
Ltd, permission was granted subject to the consent of JTC. I have already mentioned JTC’s evidence
that it would have agreed to the proposed lease to Schenker. That being the case, UOB would have
had no reason to withhold its own consent.
114 I therefore find that whilst there was no condition precedent regarding UOB’s consent, any
implied condition that such consent would be obtained would have been fulfilled had it not been for
the premature termination of the lease by Schenker.

Quantum of damages

115 The quantum of SMI’s claim as set out in the Amended Statement of Claim is as follows:

(a) Loss of rental from 1 March 2003 to

30 September 2003 ($43,000 x 7 months) $301,000

(b) Difference in rental from 1 October 2003 to

28 February 2005 (17 months)
($43,000 less $30,000 = $13,000) $221,000

(c) Agency fee $ 54,350

Total $576,350

In the Statement of Claim, the total of the three figures under (a), (b) and (c) is given as $606,350.
This, however, is an arithmetical error and the correct total, as stated above, is $576,350.

116 Schenker submitted that SMI was not entitled to recover the full amount claimed. It said that
two deductions had to be made. The first deduction, in the sum of $43,000, represented the
commission that SMI would have had to pay Ms Yong had the lease to Schenker been successfully
completed. It was Ms Yong’s evidence that on completion of the lease, SMI would be paying her the
equivalent of one month’s rental as her commission. Schenker therefore submitted that even if the
lease had gone ahead, the net amount received by SMI under the lease would have been reduced by
the commission payable to Ms Yong. I agree.

117 SMI made a rather odd submission that because the normal measure of damages for breach of
contract is the loss of that which SMI would have received if the contract had been properly
performed, whether or not SMI had paid a commission to Ms Yong was of no relevance to the amount
of damages which SMI was entitled to claim from Schenker. This argument was not logical. What SMI
had lost (and therefore had to be compensated for) was the net amount that it would have received
from Schenker after taking into account its expenses in procuring the lease. Those expenses
comprised Ms Yong’s commission. Thus, in order that SMI did not receive a profit from the breach of
contract, that commission had to be deducted from the damages. The only reason not to make that
deduction would be if SMI, having succeeded in its claim against Schenker, would then be bound to
pay Ms Yong her commission. That, however, was not a submission made by SMI. Nor did Ms Yong
assert that the commission would be payable if the suit succeeded.

118 The second submission made in relation to quantum was that SMI was not entitled to recover
the agency fee of $54,350 in full. The lease between SMI and Schenker was for the period from
1 March 2003 to 28 February 2005. The lease between SMI and OCWS Logistics Pte Ltd was for a
three-year period from 1 October 2003 to 30 September 2006. Schenker submitted that the agency
fee paid in respect of the second lease covered the whole period of the replacement tenancy and
that since that tenancy extended beyond 28 February 2005 when Schenker’s own tenancy would
have ended, Schenker should not be liable to pay that portion of the tenancy fee that was
attributable to the portion of the replacement tenancy extending beyond 28 February 2005. On the
basis that the replacement tenancy was for 36 months, the agency fee for each month would have
been $1,509.72 and since there are only 17 months between 1 October 2003 and 28 February 2005,
the pro-rated agency fee for 17 months would be $25,665.24. Accordingly, Schenker should only be
liable for that sum as agency fee paid for the replacement lease.

119 This second argument put forward on Schenker’s behalf was logical. SMI contended that the
whole of the agency fee was an expense reasonably incurred by it in taking steps to mitigate its loss
and therefore the whole fee should be recoverable. It also argued that the fee charged could have
consisted of advertisement and other expenses and was not solely commission. As far as the first
argument is concerned, I cannot accept it as SMI is not entitled to recover the expense of obtaining
a tenancy for a period after the lease to Schenker would have expired. As regards the second
argument, the invoice from the agent that SMI produced to substantiate the fee paid stated “Being
commission due to us for services rendered in connection with the rental of the above property …
$54,350”. Nothing in that statement indicated that advertisement expenses were being charged to
SMI. It was for SMI to prove that the commission included expenses. It did not do so. However, the
invoice also made it clear that SMI was charged 4% extra as goods and services tax. Accordingly, the
amount payable for the agency fee for the 17-month period should be $25,665.24 + $1,026.61 =
$26,691.85.

120 Thus, in total the damages suffered by SMI would be:

(a) Loss of rental from 1 March 2003 to

30 September 2003 $301,000.00

(b) Difference in rental from 1 October 2003

to 28 February 2005 $221,000.00

(c) Agency fee $ 26,691.85

Sub-total $548,691.85
Less $ 43,000.00

Total $505,691.85

Conclusion

121 I find that SMI has proved its case and that there was a concluded lease between it and
Schenker of the warehouse for the period of two years from 1 March 2003 to 28 February 2005.
Schenker has failed in its defences. Accordingly, there must be judgment for SMI in the sum of
$505,691.85 and costs. I award SMI interest on $258,000 (ie, $301,000 minus $43,000) at 6% per
annum from 1 October 2003 to date and interest at 6% per annum on $26,691.85 from 1 October
2003 to date. I also award SMI interest at 6% per annum on each month’s rental differential of
$13,000 from the date on which such sum would otherwise have fallen due, commencing with the
rental for October 2003 and ending with the rental for February 2005, until the date of this judgment.

[1]Para 5 of the Amended Statement of Claim

[2]Para 9 of the Amended Statement of Claim

[3]Para 10 of the Amended Statement of Claim

[4]Paras 3 to 5 of the Re-Amended Defence

[4]Paras 3 to 5 of the Re-Amended Defence

[5]Para 6 of the Re-Amended Defence

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